Orexigen Therapeutics, Inc. (NASDAQ:OREX) is developing Contrave, which is a combination of bupropion and Naltrexone, for the treatment of obesity. Both drugs are approved for other indications already. Bupropion is used already for depression and smoking cessation and naltrexone is used for alcohol and opioid addiction. The drug received a moderately favorable vote from an FDA advisory panel in December of 2010. Given that both drugs are already approved and the advisory panel vote (13-7), there was surprise that the FDA ultimately did not approve the drug citing cardiovascular safety issues. Contrave causes some increase in blood pressure and heart rate.
In order to resubmit, Orexigen is conducting a cardiovascular outcomes trial, The Light study, listed on ClinicalTrials.gov. The primary outcome measure of the trial is the gold standard for cardiovascular safety, "Time from treatment period randomization to the first confirmed occurrence of MACE." MACE is a major adverse cardiovascular event. Secondary Outcome Measures are (1) Time to the first confirmed occurrence of cardiovascular death, nonfatal myocardial infarction, nonfatal stroke, or nonfatal unstable angina requiring (2) Time to the confirmed occurrence of cardiovascular death (including fatal myocardial infarction, fatal stroke), (3) Time to the first confirmed occurrence of myocardial infarction (nonfatal or fatal), and (4) Time to the first confirmed occurrence of stroke (nonfatal or fatal). From the Orexigen 2011 annual report, "An interim analysis and NDA resubmission is planned once at least 87 MACE events have occurred, which is anticipated to be less than two years from the start of the trial. If marketing approval is received for Contrave, the trial will continue toward the final analysis in the post-approval setting." The trial is well designed and will likely give a reasonably clear answer to cardiovascular risk from Contrave. There is optimism that Contrave will prove safe enough. But before completely dismissing thoughts that Contrave will likely not have significant cardiovascular risk, keep in mind drugs like the diabetes drug, Rosiglitazone (Avandia), produced by GlaxoSmithKline (NYSE:GSK) have even been marketed before a correlation with cardiovascular events resulted in restrictions of drug use. Rosiglitazone is still available under a special access program.
What share price balances the risk that Contrave may not be approved? A safer approach may be to wait until information is released on the interim analysis of the Light study, but the share price will likely rise if the information is favorable. The other issue is whether the share price of Orexigen will trade at lower or higher levels between now and sometime in 2014. Orexigen has stated that funds are sufficient to see the company through this period. Other companies developing drugs for obesity are Arena (NASDAQ:ARNA) and Vivus (NASDAQ:VVUS).
Disclosure: I am long ARNA.